1. Field of the Invention
The invention relates generally to a method of assessing the current state of a market and, in particular, to a method of measuring and monitoring a market's liquidity to make trader recommendations.
2. Description of Related Art
Those who work in financial markets such as stock markets and bond markets are continuously striving for better, more accurate methods and techniques for predicting market performance and trends, and for more efficient, less risky methods of trading. Many methods have been devised for analyzing past and present market characteristics to extrapolate future performance. However, most prior art methods are limited to pointing out those future trends that are most likely based upon past performances under similar conditions. Since the number of factors that may influence market conditions is almost infinite, it is nearly impossible to accurately predict how a market will perform based solely upon a limited sampling of past data.
One critical limitation in prior art methods is that they do not accurately assess current market conditions. Market parameters such as volume, various indexes, bid-offer spreads, etc., only tell a very small part of the overall condition of the market. Consequently, without a more accurate assessment of a market's present condition, it is virtually impossible to determine how a market can be expected to perform in the near future, and accordingly, to make accurate recommendations based upon that limited picture (e.g., whether to buy, sell, etc.).
In addition, prior art methods that form a more accurate market picture taking into account a wider sampling of market parameters usually do not produce analyses of market condition in a timely enough fashion to be of assistance to traders. For traders who make a living predicting market performance and capitalizing on upward or downward movements as slight as ⅛ of a point, immediate determinations of market conditions is essential, as a few seconds can make the difference between profit and loss.
Therefore, there is a need for a method that accurately assesses a market's present condition and can, based upon that assessment, recommend a course of action. Moreover, there is a need for improved techniques that provide an accurate view of market changes over very short time periods.